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enacted by the Internal Revenue Service Restructuring and Reform
Act of 1998 (RRA 1998), Pub. L. 105-206, sec. 3001(a), 112 Stat.
726, provides as follows:
SEC. 7491(c) Penalties.–-Notwithstanding any other
provision of this title, the Secretary shall have the burden
of production in any court proceeding with respect to the
liability of any individual for any penalty, addition to
tax, or additional amount imposed by this title.
Section 7491(c) is effective with respect to court proceedings
arising in connection with examinations commencing after July 22,
1998. RRA 1998 sec. 3001(c)(1), 112 Stat. 727. There is no
dispute that the examination in the present case commenced after
July 22, 1998.
Section 6662(a) imposes a 20-percent penalty on the portion
of an underpayment attributable to any one of various factors,
one of which is negligence or disregard of rules or regulations.
Sec. 6662(b)(1). “Negligence” includes any failure to make a
reasonable attempt to comply with the provisions of the Internal
Revenue Code, including any failure to keep adequate books and
records or to substantiate items properly. Sec. 6662(c); sec.
1.6662-3(b)(1), Income Tax Regs. Section 6664(c)(1) provides
that the penalty under section 6662(a) shall not apply to any
portion of an underpayment if it is shown that there was
reasonable cause for the taxpayer’s position and that the
taxpayer acted in good faith with respect to that portion. The
determination of whether a taxpayer acted with reasonable cause
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Last modified: May 25, 2011